CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

An un-weighted or equally weighted price index would be best used as a benchmark index for which of the following portfolios?
A. A large and broadly diversified mutual fund holding 150 or more stocks and bonds
B. A portfolio containing equal dollar amounts of 30-40 stocks
C. A Dow Jones Industrial Average stock index fund OR an S&P 500 stock index fund
Explanation: The equally weighted index would clearly be inappropriate for the S&P 500 fund or the DJIA fund. Likewise, it would be inappropriate for the large stock/bond fund since it is a stock index only. Since the 30-40 stock portfolio is equally weighted, it should be compared with an equally weighted index.

User Contributed Comments 4

User Comment
kalps Equally weighted is best used for small portfolio of 20-30 shares as per the LOS
danlan Three types: value-weighted(DJIA), value-weighted (S&P 5000, NASDAQ) and equally-weighted.
iceluke danlan: DJIA is PRICE weighted, not value!
danlan iceluke: thanks for the correction. I obviously made a mistake if you see "value-weighted" again after DJIA.
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